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10. Chapter 10 Personal Income Tax : The Taxpaying Unit

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10.1. A fundamental characteristic of any system of personal income taxation must be the ‘unit’ chosen for taxation. It can be the individual, or the married couple, or the family, with ‘family’ narrowly or widely defined.

10.2. From the beginning, personal income tax in Australia has been based on individual incomes; along with Canada and New Zealand, Australia is one of the few countries still making this selection. This is not, of course, to assert that in our tax system (or in others with this basic unit) no regard whatever is paid to the family situation of the individual taxpayer. There are allowances for various dependants and numerous concessional deductions applying not only to the taxpayer's expenditure upon himself but also to that made on behalf of family members. It is, however, true that the allowances provided are generally rather small in relation to the total expenditure that the individual will normally make upon his or her family.

10.3. The problem of whether the individual unit system is appropriate or not has been put to the Committee in many submissions and in two main ways. Some have tackled it directly, arguing that the total income of the family is the proper indicator of ability to pay, and that the manner in which that income happens to be divided among the individuals concerned is irrelevant.

10.4. Others have raised the same problem rather less directly. Since under the individual system with a progressive rate scale, family tax will be minimised when incomes are equally divided, it is plainly to the tax advantage of families to rearrange their affairs so as to permit them to return equal or nearly equal incomes. They take measures to this effect, perhaps of a kind they would not take for any other reason. In fact, some people—for example, those in business or with substantial property incomes—can rearrange their affairs to this end fairly readily, and have been doing so in increasing numbers in recent years: other people, wage and salary earners in particular, cannot. The latter naturally have a grievance of the ‘horizontal inequity’ kind and denounce ‘income splitting’ in sharply pejorative terms. But it is often not clear whether their complaint is that others can, or that they themselves cannot, so rearrange their affairs. If the latter (whether or not they have thought the matter through), they are in effect espousing the cause of family unit taxation. If the former, they would seem to be arguing that some ways of arranging division of income are acceptable while others are not—that existing law, in sanctioning the latter, draws the dividing line in the wrong place.

I. Overseas Experience

10.5. Over the years, the general issue of the taxpaying unit has been dealt with in overseas countries in a wide and changing variety of ways which to a large extent have been influenced by the history of the legal systems of the particular countries concerned. Several examples may be described.

10.6. In 1799 upon initial introduction into the United Kingdom of an income tax, a husband and wife constituted one taxpaying unit because the English common law, unlike the laws of many parts of Europe, rejected the doctrine of community of property between husband and wife on marriage and regarded the legal personality of the


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wife as merging in that of her husband so that in law they became one person. While in course of time the growth of equitable doctrines modified to some extent the operation of the common law, for a long period this made no practical difference as, in an action to recover the tax levied in respect of the income of a wife living with her husband, he was a necessary party. It was not until towards the end of the nineteenth century that the married women's property legislation began to effect a separation at law between the wife's property and income and her husband's rights thereto. This separation was not finally completed until 1935 but, in the removal of these restrictions upon a married woman's property rights, the income tax legislation did not march in company with the laws of property. It was not until 1950 that the married woman ceased to be classified for the purposes of the income tax legislation as an ‘incapacitated person’ along with infants and various categories of mental defectives. Although from time to time full aggregation of the wife's income with her husband was in some respects departed from, the Income and Corporation Taxes Act 1970 still deems the income of a married woman living with her husband to be his income and not hers. In 1914 the husband was given the right to require separate assessment of their respective incomes and in 1918 provision was made for either husband or wife to make a similar election but, in general, separate assessment did not make the parties liable to pay less tax.

10.7. Originally the separate incomes of husband and wife were added together and this income was taxed as if it were the sole income of one taxpayer. Ultimately concessional deductions were allowed as some means of recognising differences in taxable capacity of different taxpaying units—in addition to deductions for dependent children. The United Kingdom allows personal deductions which vary according to marital status. If the wife works, a special wife's earned income allowance is also provided in the form of a deduction from taxable income additional to the personal deduction. Since 1971, married couples have been provided, where husband and wife jointly elect, with a limited option of submitting separate income tax returns. Under this option, tax is calculated as if all the income other than the wife's earned income were the husband's, so that for tax purposes the husband receives only the single person's personal deduction, and the wife is taxed as a single person on her earned income, with the single person's personal deduction only. The wife's earned income relief is not available under this option and the allowances for children must be claimed against the husband's income. The new option is described in the following terms in a reference document submitted to the OECD by the United Kingdom Government:

‘Whether this [the new option] will reduce the total tax bill of a married couple will depend upon their personal circumstances; but as a general rule it will not unless their combined income exceeds £6,900, and may not do so even then’.

10.8. In the United States there is another system that can be traced to a legal background of property and income rights. After an earlier abortive attempt to levy an income tax, Congress was given constitutional power in 1913 to impose an Income Tax Act. However, the law with regard to the property and incomes of spouses was not, and still is not, uniform throughout the United States. In eight States, which prior to their accession to the Union had been under the influence of the European community property legal system, property acquired by a husband and wife after marriage is presently regarded as owned by them in community and in equal shares and the income from such property is divisible equally between them. Each of these States has different rules to distinguish between separate income and community income but generally all earned income is community income. All property acquired by either


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spouse before marriage is his or her separate property and property acquired thereafter is their community property. Income tax returns in these eight States may be filed jointly or separately. In the separate return, half the community income is shown and, in addition, the separate income. Usually the filing of a joint return will result in a tax saving to both spouses. In the remaining States, where there is no community property law, the spouses may file a joint return and this even though one spouse has no income or deductions. Generally the filing of a joint return will result in the saving of tax for the married couple because of the tax rates applicable to the joint return or optional tax tables, the latter being available where the joint return shows an adjusted gross income from all sources of less than $10,000. The presence in the Union of a number of community property States has no doubt influenced the course of taxation in the remaining States in an attempt to achieve some uniformity in the mode of taxing spouses.

10.9. The split-income provisions, when initially enacted in 1948, gave the couple the option of filing a joint return under a tax rate schedule that provided tax brackets twice as wide as those applying to single people. This in effect resulted in the same taxation burden as if each spouse was taxed separately on half their combined income. Compared with the Australian system, it had much the same effect as legally allowing all married couples to put themselves in the position of those practising what here might be regarded as income-splitting abuses. This rather peculiar, though temporary, arrangement was an outcome of the previous history. However, as the result of criticism of this system by single persons, the rate schedules were changed in 1969 to ensure that in no event did the liability of a single person exceed by more than 20 per cent that of a married couple with the same taxable income. A new head-of-household classification was also introduced to meet the cases of unmarried persons with family responsibilities, providing for rates that fall midway between those of single and married persons. It is now possible for two single persons with equal incomes who are living together to pay less tax than a married couple with the same total income, a situation that was not possible under the pre-1969 legislation which incorporated an underlying tax bias in favour of marriage.

10.10. South Africa is a country which, through the influence of its connection with Roman-Dutch law, has a community property legal system. For taxation purposes the income of a woman, married and with or without community property, living with her husband, is deemed to be income accrued to her husband and in such case the husband makes the return and is liable for the tax. If, in the income return of the husband, there is any income earned by the wife not in association with her husband, for example not in a husband-wife partnership or in a private company in which both are interested, the husband is allowed a deduction of R.500 or the actual amount of earned income if it be less than that figure. Either husband or wife may make application to the Secretary for Inland Revenue for the right to submit a separate return and a separate return may be lodged if he considers it to be desirable. The Secretary himself may also require the making of a separate return. However, the total tax payable on the separate assessments must not be less than the total tax payable by the husband alone had the wife's income been assessed as his. In South Africa a married man's liability to tax is on a much more favourable basis than that of other persons. He enjoys lower rates of taxation. He is also entitled to a much higher primary abatement (deduction) in addition to the earned income deduction and to more advantageous medical deductions.

10.11. While the rule of aggregating the incomes of husband and wife is found in other European countries, the unit of taxation is sometimes the family. Thus, in


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France not only are the incomes of husband and wife aggregated but also the incomes of children are included in the income of the family unit. Allowance for differences in the composition of families and differences in family size are then made, not by way of deduction but instead by means of a method commonly called the ‘quotient system’. The aggregate income is divided into parts according to the number of adult persons and children in the family and tax is charged separately on each part. For this purpose a child is counted as one-half and an adult as one part. Thus a married couple with two dependent children pays three times the tax of a single person with one-third of the joint family income. This system may provide a more generous treatment of married couples, especially those in higher tax brackets with children, than either the United Kingdom or the Australian system.

10.12. The present United States system is similar in many respects to the Carter Commission proposal for reform in Canada which after lengthy discussion was not accepted by the Canadian Government. This plan provided separate rate schedules for single persons and married couples but also included the incomes of dependent children in family income subject to tax. Dependant allowances were to be granted in recognition of differences in family circumstances; however, unlike the quotient system described above, the variation in tax liability between single persons and families was to be achieved by means of the different rate schedule. But Canada preferred to tax husbands and wives as individual persons.

10.13. Mention should also be made of a recent change in Sweden which reverted from a system that taxed the combined income of husbands and wives (and of single persons living together) to one that now taxes the earned income of wives separately. Property income is still taxed in the hands of the husband as before. A stated purpose of the change was to remove the disincentives for married women to work inherent in the previous system.

II. Review of Possible Reform

10.14. With so many overseas models, old and new, to choose between, and so many compromises that could be devised, it is necessary to make a systematic review of the arguments before coming to conclusions.

10.15. Broadly there are three directions that reform could take: (i) Australia could stay with its present basis of compulsory individual taxation; (ii) it could go over to a compulsory family unit basis; or (iii) it could retain the individual basis but provide families with the option of taxation on a family unit basis if both spouses so elect.

10.16. The Committee is agreed that the second course, the adoption of a compulsory family unit basis, must be rejected on grounds of general social principle. The right to be taxed as an individual has always been accorded in Australia. At a time when women are playing an ever greater role in the economic and other affairs of society, the withdrawal of this right would certainly be regarded as a retrograde step. And objections would come not only from women: men too might take exception to a universal and compulsory commingling of their tax affairs with those of their wives. This would, in the Committee's view, make a change in this direction politically unacceptable irrespective of whether married women (or married men) paid more or less tax after the change than they do now: social attitudes to the separate status of the sexes, rather than purely economic considerations, are involved here.




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10.17. The choice therefore lies between leaving the existing basis of individual taxation unaltered (with or without measures to handle income splitting) and adding an option for married couples to be taxed on some newly devised family unit basis if they elect to do so. The choice, naturally, cannot be resolved until a number of issues about the new basis are settled, but the general argument for family unit taxation can be considered first.

10.18. The proponents of the family as the tax unit rest their case mainly on a proposition about the normal attitudes and practices of married couples in spending and enjoying the fruits of their incomes. It is argued that, however separate, legally and practically, the sources of their two incomes, in practice married couples largely share or pool their expenditure. Much is jointly consumed: one house, one lounge suite, one television set, one refrigerator and (to a diminishing extent) one car suffices. Whichever spouse made the purchase, both enjoy the benefits, and even the purely personal expenditure of each gives the other pleasure. On this view of the matter, it is the total income of the pair that determines their ability to pay rather than the way the total is formally divided between them: it is wrong that families should pay more tax the more unequally their total income is divided, at any rate to the extent shown in Table 10.A.

TABLE 10.A.: TAXES PAID BY EQUAL-INCOME FAMILIES: EXISTING SYSTEM (a)

                                 
Total family income   Husband   Wife   Total tax payable  
6,000  5,000  1,000  680 
6,000  4,000  2,000  500 
6,000  3,000  3,000  440 
6,000  2,000  4,000  500 
10,000  8,000  2,000  1,900 
10,000  7,000  3,000  1,600 
10,000  5,000  5,000  1,360 
10,000  3,000  7,000  1,600 
10,000  1,000  9,000  2,300 
20,000  19,000  1,000  7,830 
20,000  15,000  5,000  6,150 
20,000  10,000  10,000  5,560 
20,000  8,000  12,000  5,640 
20,000  4,000  16,000  6,440 
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10.19. It must be agreed that this argument has force. But even those who use it will certainly concede that a high degree of sharing of this kind is by no means universal. In some marriages, and not by any means only unhappy ones, almost completely separate patterns of spending and enjoyment may be the rule. Between the extremes a whole range of intermediate arrangements will be found. At the one extreme a family unit basis would give the fair result, at the other the existing individual basis would. The compulsory family unit would be unfair to some; the compulsory individual unit is unfair to others. A graded set of alternatives being self-evidently impracticable, to give a choice between two bases is at least better than to give none. The Committee agrees with this conclusion; the difficulties lie in settling the details.

Questions Arising over the Taxation of Family Units

10.20. The first question of detail under a family unit system is the rate scale to be used. Under the British system the same scale as for single persons is applied to the


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aggregate income of the married couple (though with qualifications in the form of allowances to moderate the extreme severity of the result). If this be called ‘pure aggregation’, then ‘pure averaging’ might be the term for the system introduced in the United States in 1948, when a schedule with tax brackets twice as wide as those for single persons was adopted for those electing family treatment. This, as noticed, gave the same arithmetical result as if each spouse was taxed separately on half their combined income.

10.21. In terms of economic equity between married and single persons, neither of these very simple solutions to a difficult issue commends itself. Pure aggregation produces the same result as the current Australian individual basis in the special case of one spouse having no income (apart from the effect of the modest dependent spouse allowances). But it would increase the tax paid by the pair in almost any case where both spouses have significant incomes. They would then pay more tax than if they had elected to be taxed as individuals, and the amount by which that tax would increase would be the greater the more equal were their separate incomes. An election system with this rate would ensure no elections. Pure averaging, by contrast, would mean that election saved tax for all married couples except those who happened to have equal incomes. The tax each paid would in no way reflect the additional capacity to pay inherent in the notion of shared enjoyment. Everyone would have a financial inducement to elect, including perhaps those whose relationship was more fairly described as, and felt to be, economically quite separate: the tax result would be the same as if all couples achieved complete income-splitting. The loss of revenue would be so great as to entail, if the income tax revenue were to be maintained, a severe increase in tax on single persons (and those married couples who resisted the tax inducement to represent themselves as a sharing unit). It was for this reason that the pure averaging provisions of the United States tax were abandoned in 1969.

10.22. It is inherent in the equity arguments for an elective family unit system that there should be a distinct family rate somewhere between the extremes of pure averaging and pure aggregation. The former is undoubtedly too kind to electing pairs, too unkind to single persons and couples who require individual treatment; the latter undoubtedly too harsh on electing pairs, too kind to single persons and those who accept individual treatment. The choice of family rate relative to the individual rate is therefore one of nice judgment.

10.23. A further question that has to be dealt with under a family system is the treatment of dependent wives. There are here two distinguishable situations: (i) when the wife's dependence is primarily due to her looking after small children rather than going to work; and (ii) when, without children, she simply prefers to take no paid work (or can obtain none). In the present Australian income tax system they are treated alike. As regards (i), married couples who both work often feel that, because their child-minding and their housework involve more strain than for families where the wife is at home, they are unfairly treated at present. Under a family unit system this situation could be handled by an earned income allowance for the second working spouse. As regards (ii), under the present system the family in which the wife stays at home may feel over-taxed relative to the family in which both spouses work and receive the same total income, since the dependent spouse allowance is small and the wife will almost certainly be contributing domestic services of value even though they are unmeasurable. But under a family unit system with a rate near the pure averaging end of the range, the situation might be reversed. Examining this problem, the Canadian Royal Commission on the Status of Women (1970) was tempted to propose the abolition of any allowance for dependent wives without dependent children,


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but concluded against this recommendation because it felt there were inadequate employment opportunities for married women of working age in many places and it was concerned also for the position of elderly wives. The future of the dependent spouse allowance in Australia is further discussed in Chapter 12.

10.24. The treatment of children in a family unit system also requires thought. It is implicit in the concept of a family unit that the income of children is part of that of the family as a whole. Certainly when living at home children have full use of the common equipment of the family and may properly be said to share in much parental expenditure. Considerable scope for tax avoidance would remain if any property income they derived, whether the property came to them by parental gift or otherwise, were left to be wholly taxed on an individual basis. This matter is dealt with in Chapter 11. Income being accumulated in a trust estate to which a child is contingently entitled must also be considered. Indeed there might be income so accumulating to which husband or wife is contingently entitled. These matters are taken up in Chapter 15.

10.25. Concessional deductions for dependent children, and the associated issue of child endowment, appear to be unaffected in principle by the possible adoption, or rejection, of a family unit system and their discussion can be left over to Chapter 12. This would not be so, however, if the French version of the system were selected. That variant, summarised in paragraph 10.11, provides, as there remarked, extremely generous treatment for parents with children and seems to be expressly designed to encourage a high birth rate. The Committee presumes that this is not an objective of Australian Government policy and would therefore not recommend a quotient system.

Individual Taxation with an Election System

10.26. The provision of the option to be taxed on a family unit basis would not reduce the necessity, which the Committee regards as urgent, to remedy tax avoidance by income-splitting within a family which has not exercised the option. It would be necessary, at the least, to deny the tax effects of tax-avoidance transfers of income by parents to children. Furthermore, spouses who were taxed as individuals and who had incomes of unequal magnitude would still have an incentive to make tax-avoidance transfers of income to enable more equal incomes to be returned for taxation purposes. By choosing to be taxed as individuals they would have asserted a claim to behave, in their financial dealings, as if they were at arm's length, and it would be important to ensure that this relationship was reflected in their tax liability. Measures directed against income-splitting are proposed in Chapter 11. Consideration must also be given to the accumulation in a trust estate of income to which a member of a family is contingently entitled. This matter is considered in Chapter 15.

Restrictions upon the Right of Election

10.27. During the decades over which a marriage will normally last, the absolute and relative incomes of husband and wife will usually change. There will be years in which to be taxed as a unit would be more advantageous financially, others when separate individual taxation would reduce their tax liability. To provide married couples with an unrestricted right to move in and out of family unit taxation whenever it would save them money to do so would be perilous to the Revenue and inequitable between married persons and single, whether they be bachelors, spinsters, widowers or widows. The proposal to institute an option for taxation as a family unit is not put forward as a mode of reducing taxes for married persons (or raising them for the


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single); it is, rather, designed to provide a fairer allocation of personal income tax between persons, and in particular between families with different practices and attitudes towards the expenditure of their separate incomes. Some restriction on the right to elect and to cancel past election therefore seems to be imperative.

10.28. Such a restriction would not be easy to define and administer. Provisions for cancelling an election would of course be necessary in the event of formal separation or divorce. In addition it might be provided that married persons who do not elect for family unit treatment within some defined period after the option becomes available or after their marriage may elect thereafter only upon the fulfilment of a condition that guards the revenue from any misuse of the option to elect. Thus the condition might require the payment of the additional tax that the spouses would have paid had they elected in the immediately preceding years.

De Facto Relationships

10.29. Where any provision of the present law depends on a marriage relationship, a formal marriage is necessary, although in some circumstances an illegitimate or adopted child may qualify as a dependant. The Committee is conscious of the change in social attitudes that could lessen the significance of formal marriage. An extension of the law so that the status of ‘spouse’ would include a partner in a de facto relationship would, in the Committee's view, be desirable if it were possible to define such a relationship in a manner that would not pose undue problems of interpretation and application. The Committee has, however, concluded that it is not possible to define the relationship in a satisfactory way. One context in which proof of the relationship will be important is the election of family unit treatment. The restrictions on the election could not be conveniently applied. Thus the requirement that an election must be made within a stipulated time after marriage would pose the problem of establishing the commencement of the relationship. The claim for a concession for a dependent spouse made in a previous return would assist; but no such claim would have been made where, because both had income, no tax advantage could have been obtained. Another context is the application of provisions against income-splitting. The Commissioner could not enforce the law in regard to a de facto relationship without what might be thought to be an unacceptable invasion of privacy.

Separated or Divorced Spouses

10.30. The present law (section 23 (1)) exempts income received by way of periodical payments in the nature of alimony or maintenance, by a woman from her husband or former husband. There is a proviso denying the exemption where the husband or former husband has, for the purpose of making such payments, divested himself of any income-producing assets, or diverted from himself income upon which he would otherwise be liable to tax. The husband is not allowed a deduction of the payments made to his wife or former wife.

10.31. In some countries the wife or former wife is taxed on the alimony or maintenance receipts and the husband is allowed a deduction of the payments. A system of this kind was proposed in Australia in 1942 but was rejected by the government of the day largely on the ground that a taxpayer who was separated or divorced from his wife would have been placed in a more advantageous position than a taxpayer who was not. The system, in effect, involves an income split, which would not be open to the latter.

10.32. The Committee would consider it appropriate to allow a husband a deduction for alimony or maintenance payments, whether or not divorced from his wife,


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provided there are safeguards against connivance to exploit the potential tax advantages and that the payments are taxed as the income of the wife or former wife. Already the law, in effect, allows a split of income between husband and wife where for the purpose of making payments to his wife the husband has divested himself of income-producing assets or diverted from himself income upon which he would otherwise be liable to tax. As explained in paragraph 11.45 section 102B (4) protects such a split of income from the operation of the short-term assignment provisions. The policy reflected in section 102B (4) should, in the view of the Committee, extend to allow a deduction of the payment where the husband is not in a position to divert income to his wife.

A Proposal for Public Examination

10.33. The provisions of a regime for family unit taxation as an optional alternative to the existing individual basis would be a large departure for Australia, requiring substantial public discussion. The Committee has not suggested a rate scale if only because in this report, given the separate necessity to consider the existing scale and the variety of other proposals being made, no precise figures would be helpful. In any case, statistics of family incomes, and their distribution between individual members, would be required to calculate the effect on revenue. But the Committee emphasises the importance of the choice of scale, and the need, when one is proposed, to explain its effects on families in different situations and its relation to the individual tax scale, in a readily comprehensible manner. The Committee is persuaded of the equity arguments for providing an option that recognises the reality of one large category of family relationship better than does the individual basis, and therefore recommends that the Government prepare a detailed scheme for an elective family unit system for public examination.




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Reservation to Chapter 10: Personal Income Tax: The Taxpaying Unit

In paragraphs 7.5–7.33 of its preliminary report (now paragraphs 10.1-10.28 of the full report) the Committee discussed matters concerning the ‘unit’ to be chosen for income taxation, namely, the individual, the married couple, the family, with ‘family’ narrowly or widely defined. After reference to overseas systems of taxation, the difficulties inherent in an elective system for joint returns, and the problems of an appropriate rate scale, the Committee concluded in paragraph 7.34 of its preliminary report: ‘The Committee is persuaded of the equity arguments for providing an option that recognises the reality of one large category of family relationship better than does the individual relationship, and therefore recommends that the government prepare a detailed scheme for an elective family unit system for public examination.’ The ‘large category of family relationship’ was not defined by the Committee and in what sense its ‘reality’ existed for taxation purposes was not specified. This conclusion has been carried over into the full report (see paragraph 10.33) and it is to this that I wish to make a reservation.

The Committee has not overlooked the use of the family relationship for the prevention of income-splitting between the family members (including children) and the avoidance of death duties and has made detailed recommendations elsewhere in this full report (which time did not allow for in the preliminary report) to prevent the exploitation of the procedures which have been employed to these ends. As I have endeavoured to make clear in a paper titled ‘Aggregation of Incomes of Husband and Wife’ which accompanies this full report, the aggregation of the separate incomes of husband and wife never originated as a means of inhibiting schemes for income tax avoidance; and the propriety of aggregation should be considered quite apart from the activities of those who seek to abuse the taxation system for the reasons which I have set forth in the paper above referred to.

Upon much further consideration than I was able to give in the very limited time which was available in getting out the ‘broad brush’ preliminary report, I am firmly convinced that the Committee's conclusion is unsatisfactory and should not have been made. In the paper referred to above I have discussed in some detail the historical basis of the aggregation of the incomes of husband and wife in the United Kingdom and the United States and have pointed out that in Australia, with the exception of a very brief period in the early income taxation period in Tasmania, Australian taxation systems of income tax have consistently rejected the aggregation of the respective incomes of the spouses. I have also opposed their aggregation on the grounds of unfairness and for a number of other reasons which appear in the paper.

I have also observed that the recent Canadian Royal Commission on the Status of Women (1967-70) found against such an aggregation of incomes but recommended an optional system for a joint return which would result in a tax advantage for those married couples who elected to be taxed jointly.

Before the inevitable expenses of any public examination of a detailed scheme for an elective unit system should be seriously contemplated, it seems to me that a rate system for the taxation of the aggregated incomes of husbands and wives and its


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consequences both to the taxpayers and to the Revenue would have to be given close consideration. In all taxation systems which embody an optional system of aggregation for the taxation of husbands and wives, everything hinges upon the rate scale and a special rate scale is sometimes devised for optional use. The word ‘elective’ presupposes a choice for the taxpayers not only between the individual and the joint return and assessment but also between different rate scales which could produce monetary results which are, on the one hand, advantageous to the taxpayers and, on the other, disadvantageous to the Revenue.

If a rate system were constructed so as to result in both spouses paying a higher total amount of tax than they do under an individual unit base, this would be not only an unacceptable approach in Australia but also one which, for reasons which I have given, is unjustifiable. If it were to result in the payment of less tax than otherwise would be recoverable if each spouse were individually taxed, naturally it would meet with wide acceptance on the part of the taxpayers but at the same time would bring about a substantial loss to the Revenue. If it were at all possible to ensure that the tax upon the aggregated incomes would not bear more heavily upon each of the taxpayers, husband and wife, than the existing individual unit system, an eventuality which would lead to a great deal of complexity for both the administration and the taxpayers alike, then the change from the existing system would be an expensive exercise in futility.

In my opinion, in the world of today a married woman should be treated both under the general law and in the taxation system as an individual in her own right and, in relation to the income which is both morally and legally her own, she should pay no more and no less tax than if she were a single person.

For these reasons I have come to the conclusion that a public examination of the kind recommended in the preliminary report—and repeated in the full report—should not be embarked upon.

K. W. Asprey

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